Embattled dairy company Synlait Milk will need to cease trading or initiate a formal insolvency process if a $130 million payment to its banks is not made next month and the banks do not agree to alternative arrangements, the company’s board believes.
A special shareholders meeting is being held both at Synlait’s Dunsandel factory and online on July 11 to vote on a resolution to approve the proposed entry into a $130m shareholder loan from Bright Dairy International Investment Ltd, a related company of Bright Dairy Holding Ltd — Synlait’s 39.01% shareholder.
If approved, Synlait would fully draw down the loan to meet the payment due on July 15.
Earlier this month, Synlait confirmed more than half of its suppliers wanted to quit.
It reported a $96m half-year loss.
In notices this week, the dual-listed company said it would only be able to meet its payment obligation if the resolution was approved by shareholders.
Synlait’s independent directors unanimously recommended shareholders vote in favour of the resolution.
Bright Dairy could not vote in favour of the resolution and the directors appointed by Bright Dairy abstained from making a recommendation.
The a2 Milk Company had not determined how it would vote.
If Synlait was advised of a change of status of a2 Milk’s voting intentions, it said it would provide a market announcement.
An independent appraisal report for shareholders, prepared by Northington Partners, found the terms and conditions of the shareholder loan were fair to Synlait shareholders not associated with Bright Dairy.
Synlait chairman George Adams said the company was progressing at pace a series of structural initiatives to address the scale of challenges it faced.
Board and management were focused on reducing debt, accelerating volume growth and optimising cost and operational performance.
It was also continuing to progress the structure, terms and conditions of a proposed equity raise.
